STI hits new high

Do you feel the fear?

Well, the answer is quite obvious with the STI hitting a new high today cruising past the 3300 mark. A couple of brokerage houses and analysts have predicted a few months ago of a correction sometime after the CNY due to profit-taking off the table.

A number of my fellow analysts felt the market is over-bought and they are waiting for 'that' correction before taking any actions. Friends of friends have cut down their holdings with profit-taking amist the pare-down. However, the correction that many have been waiting for will not occur anytime soon. Why so?

First off, my question to you would be: What would substantiate a correction? Are the prices relatively high to earnings? Certainly not for the STI index. Within firms, maybe a couple, but the overall market indicates a strong no. Many companies who have reported for the full year or quarterly earnings have posted strong growth with an average of 10-25%, depending on which sector they are in. Thus, the robust economy is certainly not a case for correction to set in.

We should expect to see the index sailing past the 4000 mark within the year with expectations of investors going strong and the growth figures -- in revenue and profits, surpassing these expectations. What could possibility sustain the current growth that we are enjoying? The answer could simply be what everyone has been chasing after -- Asia's age of discovery, in particular the twin growth, China and India. A phenomenon that could last 20years down the road akin to that of the America Dream story.

However, with high expectations comes greater responsibility on our part as we have to be more alert. For the next result reporting quarter, any actual figures that are below the expectations would see a drop in the prices. These earnings are affected by the relative performance of the economy. Therefore, the stock market becomes a leading indicator of how well the economy is faring. In a buoyant economy like this, all boats rises.

With a robust economy, the one critical factor in deciding which boat rise or sink -- expectations.